How to (potentialy) grow our portfolio

Question

Hi everyone,

Need tips or advice on how to grow our LTR portfolio.

We have 2 LTRs and a primary residence in the West Valley (Phoenix). We'd like to grow but are stuck since we dont have another 20% down. Our yearly gross is $150k.

What would be the best way to get into another property?

Please let me know if you need more info

Thank you for your time!

Jeremy Holden · Answer

DSCR loans

Sean Bozigian · Answer

Since you mentioned already having a primary and needing 20% down for the next purchase, would you consider converting your current primary into a rental and buying a new primary residence? That would be the most straightforward approach and allow you to pick up another property with less down, but I totally understand if it’s not feasible for your current situation.

I’ve helped a few investors over the past year with assumable mortgages. In each case, they’ve been able to bring significantly less than 20% to closing and assume rates well below the current market. Plus, these assumptions are much more straightforward and above board than sub2 or other creative financing options. Happy to discuss more if you’re interested!

Denise Supplee · Answer

Hi @Armando Carrera Have you considered investing with others? That lowers costs needed up front and I have good partnerships with those who knew more about maintenance and ended up saving us money. (Be careful, because partnerships need careful scrutiny as well). I know invest in my coinvesting club with a bunch of others in syndications. Love doing it that way!

Rick Pozos · Answer

Borrow from friend's and family's retirement money. They will not ask you to put down 20%, maybe 5%, maybe nothing. Google-Self Directed IRA. I borrow from several friends and sister, brother in law.

Live well below your means. You would be surprised how much you can save by not buying a new car every few years, eating at home or taking your lunch to work, no Starbucks or whatever your normal vice.

Jackson Harris · Answer

Hey Armando, not a bad spot to be in!

You can go the sub2/assumable route but heard enough horror stories from those deals I'd recommend staying away.

The other route is to wholesale to get some cash and bring 20% to the next deal, or if you're able to take any equity out of the other properties you own, you could could deploy those funds in another deal. Not sure how long you've lived in your primary, but buying another primary can allow you to put 3-5% down - which in Phoenix can allow you to get some great MFH in good areas if LTR is your strategy.

I'm doing the same right now, would love to connect and see what areas you're looking into as well!

Jonathan Taylor Smith · Answer

@Armando Carrera - When I was starting out, I ran out of 20% down payments after my 4th property. But I was able to continue buying, and took down numbers 5, 6 and 7 as LEASE-OPTIONS - with only $100, $1000 and $3000 down respectively. In each case, it was someone getting married, their spouse already had a house, and they were either upside down on their property and/or it needed a massive amount of work (for which they did not have the money) to make rental ready - so they could not rent it out. Then I got several more (well into double digits) using funds from Private Lenders. In some cases, I've been able to buy properties with ZERO cash out of pockets, and sometimes even walk away from the closing table with CASH - because the Private Lender funds more than my purchase price. That works well when the property needs rehab and I'm getting it for a price below its value. And of course, there is also subject-to and seller financing.

Jonathan Taylor Smith · Answer

With a lease-option, you are not "on the deed", as ownership remains completely with the owner / seller. However, the purchase option should be recorded against the title of the property, so that the property cannot be sold to anyone BUT YOU while the option exists (it has a time limit). And during that time, you control the property through the lease. And that lease is normally worded to give you more control than a regular tenant would have - such as the right to modify / upgrade the property to an extent, sub-lease, etc...

Armando Carrera · Answer

Thanks Johnathan!

Could you elaborate on the lease option? Were you on the deed?